Where Does California’s $635M in Marijuana Tax Money Go?

marijuana bankingThe state of California has now permitted the legal use of marijuana for two years. And tax dollars collected from the cannabis industry are already showing great impact across a variety of sectors.

Since its passing in 2016, Prop 64 has earmarked its entire cannabis industry tax revenue, minus regulatory costs, to supporting public health, repairing the environment, and bettering public safety.

New parks, healthier children, broader educational opportunities, forest clean ups, drugged drivers removed from the roads, and criminal records cleared are just some of the areas already seeing big improvements thanks to Prop 64 tax revenue contributions.

And this is just the beginning. In mid January this year, Gov. Gavin Newsom proclaimed another $332.8 million in cannabis tax revenue would be allocated to social services for the 2020-2021 fiscal year.

The holistic Prop 64 picture is vast (its impact data spans more than a dozen state agencies, and countless local counterparts) and challenging to appreciate in its entirety. So with this article, our business cannabis lawyers aim to highlight some of the key initiatives already benefiting a great deal.

Recapping California’s Cannabis Tax Rates

  • A 15% state retail sales excise tax
  • A cultivation tax of $9.65 (raised from an initial $9.25)
  • A state sales tax of 7.25% on retail cannabis sales, plus up to 1% local sales tax
  • Local cannabis business taxes, ranging from 0% up to 15% (San Francisco has no local cannabis excise tax, whereas Oakland is 10%.)

Marijuana Tax Revenue Expenditures in California (Fiscal Year 2019-2020)

Once research and regulatory costs have been addressed, the remainder of funds are dispersed as follows:

  • 60 percent to youth-focused anti-drug programs;
  • 20 percent to environmental conservation; and
  • 20 percent to public safety initiatives.

In year one alone (2019-2020), those disbursals totaled approximately $200 million. Given the cannabis tax increase introduced in 2019, fiscal year 2020-2021 allocations have also increased, now reaching $332.8 million.

$140.8 Million Covered Childcare for 11,000 Low-Income Children

The National Conference of State Legislatures states that for each dollar spent on child care and early education, society receives $17 in benefits.

In 2019-2020, 8,700 children in low income families received child care vouchers, allowing their parents to continue going to work. The 2019-2020 budget notes that this kind of initiative is so important because it helps keep kids engaged and occupied in a safe place, while mitigating the likelihood of their becoming involved with drugs.

Since the Great Recession, this program has suffered severe budget cuts on three separate occasions. With the help of Prop 64 funding, only now is the program returning to levels it maintained as far back as 2008.

A Quick List of Benefits Californians Enjoy Thanks to Prop 64  
A snapshot of other sizable takeaways to note when recapping the impact Prop 64 tax revenue has already made, include:

  • The scope of childcare assistance will increase in the 2020-2021 fiscal year, with Prop 64 providing $140 million to cover childcare for 11,000 children from low-moderate income families
  • Cities that allow dispensaries will receive $44.8 million in grants to support public health and safety initiatives
  • $39.9 million will be allocated to help combat illegal cannabis grows and to restore damaged wildlands
  • In 2019 alone, Tulare County received $25.3 million to help facilitate the removal of meth, guns, herbicides and trash
  • The DHCS is committed to countering health impacts for growing up a low-income minority. One program idea currently under consideration could see legal marijuana tax revenue used to employ released prisoners to help deter juvenile offenders.
  • Social workers could see $30 million reinvested into their local communities
  • $21.8 million has been earmarked to help establish safer roads
  • Prop 64 asked the legal marijuana industry to pay its own costs, and it has. This year Prop 64 taxes paid for three state agencies. $57.8 million has been allocated to continue licensing and regulating the industry in fiscal year 2020-2021.
  • $15 million has been carved out for science and policy research
  • Through the 1 to 15 percent local cannabis business tax, legal cannabis taxes are also quietly paying for cop cars, new parks and ambulances throughout California. $100 million has been allocated to continue doing so in 2020-2021.

Legal Implications
Its clear that many different sectors throughout the state of California have benefited greatly from the tax revenue generated by legalized marijuana.

It is important that the legal cannabis industry continues to receive support from legislators in making up ground on the illicit market. And the better the legal market does, the farther tax dollars generated can reach back to help improve day to day life for tens of thousands of people in local communities across the state.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:
Proposition 64

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